Employment law outlook

Citation

Pitt, M. (2006), "Employment law outlook", Human Resource Management International Digest, Vol. 14 No. 5. https://doi.org/10.1108/hrmid.2006.04414eab.001

Employment law outlook

Mutual trust and confidence between employer and employee are implied in every employment contract. They most often come to the fore in constructive-dismissal cases, but their scope is almost limitless.

United Bank, for example, gave an employee six days’ notice to move from Leeds to Birmingham. His employment contract said that he could be asked to work in any of the bank’s UK branches. The employee felt he could not comply, and resigned.

He won his case at the Employment Appeal Tribunal. It said that the mobility clause was subject to United Bank’s duty not to behave “in a manner likely to destroy or seriously damage the relationship of trust and confidence” between the bank and its employees.

When a company in another case altered its shift patterns, a husband and wife were placed on separate shifts and so were rarely at home together. The wife resigned when the employer failed to change the situation. An employment appeal tribunal ruled that the company’s conduct was neither reasonable nor proper because, with a little extra thought, it could have arranged the shifts differently.

Twenty-four hours after it gave an employee a written warning for poor timekeeping, a firm summoned him to a disciplinary hearing and gave him a final written warning for the same thing. The Employment Appeal Tribunal decided that this was oppressive and likely to damage the relationship of trust and confidence. But such treatment might have been appropriate if the complaint had been one of gross misconduct.

A Texas Homecare supervisor’s letter containing serious and false allegations about an employee was left visible on a computer screen. The employee and his colleagues saw the letter. An employment tribunal decided that this breached the implied term.

Employees’ implied duty of trust and confidence to their employer prevents them from removing or disclosing, without permission, information belonging to the employer. This most obviously covers trade secrets – formulae, patterns, devices, techniques, computer programs, recipes, processes or methods that the owner does not want to reveal publicly because they provide the company with an edge over its rivals.

A firm that suspects one of its trade secrets is threatened can apply for an injunction. This could, for example, stop an employee or ex-employee from disclosing it, or prevent anyone to whom the secret has been passed from using it. The company can also seek damages for losses. In these cases, the court will require the firm to show that the information was truly secret, and the amount of loss caused. Also, the court will want to be sure that the firm has taken precautions to protect its secrets. Companies must therefore check that employees know when they are handling secret information.

To promote mutual trust and confidence in these circumstances, employers should ensure that sensitive information is marked confidential and released only to employees who need to know it. In an age of computer hacking and convenient e-mailing, firms should take particular care to protect sensitive information stored electronically.

As part of their duty not to undermine trust and confidence, employers owe all their employees a duty not to carry out business corruptly or dishonestly. If employees discover corruption or dishonesty, they are entitled to resign and claim constructive dismissal. Tribunals must judge an employer’s actions objectively when deciding whether confidence has been breached. The question is not whether the employee has actually lost confidence in the employer, but whether the employer’s actions make it likely that confidence will be undermined.

Senior employees’ contracts often contain covenants that restrict their activities after their employment has ended. These covenants must be very carefully drafted because tribunals will always want to be sure that they are not acting in restraint of trade. The employer must be able to show that he or she has a legitimate interest to protect – such as a trade secret or a connection with a customer – in relation to the employee’s employment. The covenant must be no wider than is needed to protect that interest.

A typical restrictive covenant might prevent the former employee from touting for custom from the employer’s clients. The prohibition should be limited to clients with whom the employee has dealt personally in the fairly recent past, and should only be for a reasonable period of time. It may sometimes be difficult for the employer to demonstrate that touting is actually taking place. In these cases, the covenant may prohibit the ex-employee from dealing with the employer’s clients, irrespective of whether the employee initiates the contact.

Another restrictive covenant might prevent the former employee from operating a competitive business within a certain radius of his or her old employer’s premises, or from joining a named competitor. This could be particularly relevant to sales personnel.

Restrictive covenants can also be used to prevent ex-employees from poaching staff. Tribunals are increasingly willing to accept these covenants if the employer can show that he or she has invested in a complement of skilled staff. The covenant should specify the seniority and expertise of the staff in question.

A further use of covenants is to prevent the employee from disclosing confidential information after he or she has left the firm.

Of course, covenants that relate to poaching customers or staff could never be used in relation to clients and employees who joined the employer after the employee had left.

Firms should never try to enforce restrictive covenants if they cannot prove that the former employee’s breach has caused actual harm.

Mike PittEmployment-law partner at UK solicitor Pearson Hinchliffe